Micron expects strong memory chip sales

Micron Technology Inc. gave a strong sales forecast for the current quarter and told investors it’s through the worst of a slump in the memory-chip industry.

Revenue will be as much as $4.8 billion in the fiscal second quarter, Micron said in a statement. Analysts had projected $4.76 billion, according to data compiled by Bloomberg. Adjusted earnings will be 35 cents a share, plus or minus 6 cents. Analysts estimated 40 cents a share on average.

Wall Street has been predicting a recovery in demand and expects the market for computer and smartphone components will return to growth in the second half of next year. The results from Micron, the biggest U.S. maker of memory chips, confirmed this optimism.

“We are optimistic that Micron’s fiscal second quarter will be the cyclical bottom for our financial performance,” Chief Executive Officer Sanjay Mehrotra said in the statement.

Shares of the Boise, Idaho-based company rose about 3% in extended-trading following the report. They closed at $53.04 earlier on Wednesday, leaving them up 67% this year. The shares had rallied more than 10% in December.

Net income in the period ended Nov. 28 fell to $491 million, or 43 cents a share, from $3.29 billion, or $2.81 a share, a year earlier. Revenue declined 35% to $5.14 billion.

The company makes dynamic random access memory chips, which help processors crunch data in computers and smartphones, and Nand flash memory, which stores information in those devices.

Under Mehrotra, Micron has pursued different markets for its chips to reduce wild swings in the balance of supply and demand. The company has so far been able to avoid the heavy losses it experienced as recently as 2016.

At its lowest ebb in that year, the company burned through $1.3 billion in cash in a quarter, according to Mehrotra. If his projections for fiscal 2020 pan out, it will be the fourth year in a row the company has had positive free cash flow, the first time it has managed such a run.

“Of course there will be cycles such as what we experienced in 2019,” he said in an interview. “But even in the most challenging environment Micron has delivered relatively strong results.”

The U.S. government’s designation of Huawei Technologies Co. as a threat to national security has dented sales of Micron, which has been a major supplier to the Chinese company. Micron applied for a license to resume shipments arguing, like many of its U.S. peers, that the ban hurts American chipmakers because Huawei can get the same components from foreign rivals.

Micron confirmed Wednesday that it “received all of the requested licenses that enable us to provide support for certain products” to Huawei for the Chinese company’s mobile and server businesses. Resuming that relationship will take time and Micron doesn’t anticipate “a material impact on our revenue for the next couple of quarters,’ the company said in the statement.

Micron’s biggest competitors are South Korea’s Samsung Electronics Co. and SK Hynix Inc., which aren’t subject to U.S. export restrictions.

Now read: Analysts are not excited about chipmaker stocks in 2020

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Micron expects strong memory chip sales